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China steps up its push into clean energy

The biggest energy consumer is aiming for renewables to account for at least 35% of electricity consumption by 2030

Thu, Sep 27, 2018 - 5:50 AM

China's Renewable Portfolio Standard is among efforts to ease the nation's reliance on coal and combat pollution. While helping to boost consumption of renewable energy, the policy also seeks to alleviate the subsidy burden by raising revenue through penalties for non-compliance.

PHOTO: AFP

Beijing

CHINA is stepping up its push into renewable energy, proposing higher green power consumption targets and penalising those who fail to meet those goals to help fund government subsidies to producers.

The world's biggest energy consumer is aiming for renewables to account for at least 35 per cent of electricity consumption by 2030, according to a revised draft plan from the National Development & Reform Commission (NDRC) seen by Bloomberg.

Previously, the government has only set a goal for "non-fossil fuels" to make up 20 per cent of energy use by 2030.

The new plan, known as the Renewable Portfolio Standard (RPS), is an update of an initial draft published in March. The standard - which sets minimum consumption levels of electricity produced from renewable sources - is among efforts to ease the nation's reliance on coal and combat pollution that blights the world's most populous nation. While helping to boost consumption of renewable energy, the policy also seeks to alleviate the government's subsidy burden by raising revenue through penalties for non-compliance.

"We see the new RPS consultation paper having more implementation details and is more favourable to operators," BOCI Research Ltd analysts including Tony Fei wrote in a report on Tuesday. The plan focuses "on improving the consumption of renewable energy, which is the major long-term purpose of the RPS mechanism".

The NDRC also increased 2018 and 2020 non-hydro power consumption targets for some provinces, including requiring Inner Mongolia to increase its use to 18 per cent this year from a previous goal of 13 per cent. Targets for regions such as Yunnan and Xinjiang have also been raised.

The latest document also called for non-compliant firms to pay compensation fees to grid companies, which will be used to cover government subsidies for renewable projects. In recent years, China has pumped more money into renewable energy than any other country, leaving the government with a hefty subsidy bill.

"This also leaves us optimistic that the NEA may be mulling other ways to address the subsidy deficit issue," BOCI said, adding the new plan may help to dismiss concerns about full subsidy payments to existing projects. "We expect the final version to be announced before the end of 2018 as the NEA previously guided."

Other details from the plan, according to the draft document and BOCI report, include:

Extends RPS compliance to local grid companies that aren't under State Grid Corp of China or China Southern Power Grid Co, as well as power sales companies.

Feedback on the plan due Oct 15.

Renewable power credits, known as green certificates, will be issued to renewable energy producers, who will transfer them to grid companies when they dispatch power.

Green certificates may also be transferred to direct power purchasers if the agreed price includes the certificates.

The price of renewable power traded across regions or provinces must include price of the certificates.

Revenue from green certificates will be deducted from subsidies paid to operators. BLOOMBERG